How Technology Companies Can Protect Intellectual Property

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Commercial & Corporate Law

Hunter Boone

Hunter has been a part of the Sequoia Legal team since 2017.  Hunter handles general corporate matters, healthcare compliance, international trade laws, and anti-kickback regulations.

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How Technology Companies Can Protect Intellectual Property

In the vibrant landscape of global commerce, from the tech hubs of Colorado to major international businesses, assets aren't just bricks and mortar. In this digital age, a significant portion of a company's worth lies in its intangible assets, primarily its intellectual property.

Intellectual property, which ranges from software source code to patents and trademarks, forms the backbone of companies like Microsoft and Oracle, dictating their market dominance. For technology firms, safeguarding intellectual property is paramount, as innovation and competition depend upon it.

What Is Intellectual Property for a Tech Company?

Intellectual property (IP) is a prized intangible asset that stems from original thought, often acting as the cornerstone of a tech company's competitive edge.

You might think of IP as those unique creations of the mind that provide moral recognition and give a company its unparalleled advantage in the marketplace. This includes everything from software code, algorithms, and designs to website content, blog posts, and brand logos.

The World Intellectual Property Organization characterizes IP as the outcome of human intellectual creativity. While certain IP rights, like copyright, automatically protect creators upon inception, others require official sanctions from government entities to be legally secure.

In the tech realm, intellectual property ensures that innovations remain proprietary, enabling businesses to navigate and succeed in a highly competitive landscape.

Why Does Intellectual Property Protection Matter So Much for Tech Firms?

Why Does Intellectual Property Protection Matter So Much for Tech Firms?

Intellectual property is essential for tech firms, not just as a legal safeguard but as a driver of innovation and growth. In the world of technology, IP embodies the creative efforts behind software, branding, artistic works, and inventive solutions.

Patents grant inventors exclusive rights over novel tech products or software, guaranteeing that groundbreaking innovations remain proprietary. Trademarks like names, logos, or symbols establish brand identity and promise a certain quality to consumers.

Similarly, copyrights shield original artistic and literary works, like software codes or digital content, from unauthorized replication. And trade secrets offer tech companies a competitive advantage, whether it's a unique algorithm or a business strategy.

Effectively managing these IP assets and harnessing their potential can be a game-changer, providing tech firms with avenues for revenue generation and cementing their competitive stance in the marketplace.

Is There a Difference in IP Protection for Tech vs. Traditional Businesses?

Absolutely, for several compelling reasons. First is the nature of the assets in question.

Traditional businesses often have tangible assets like machinery, buildings, and products. By contrast, tech companies' most valuable assets are intangible — software code, algorithms, and data. These intangibles require distinct IP protection strategies like software patents and source code copyrights.

Speed of change is another consideration. The tech industry evolves rapidly; as such, innovations can become obsolete within months. This necessitates quicker IP protection to preserve a company's competitive advantage, whereas traditional businesses might operate on longer innovation cycles.

Global reach is also a factor. Tech products, especially software and digital services, can be distributed globally in an instant. Such a broad geographic extent demands a focus on protecting intellectual property across multiple jurisdictions, unlike many traditional businesses that operate in more localized markets.

Furthermore, the tech sector is marked by fierce competition, with companies racing to launch similar features or services. Strong IP protection helps differentiate offerings and can prevent competitors from replicating unique functionalities.

In terms of investment and valuation, IP can be a critical factor in securing investment. Investors view strong IP portfolios as indicators of a company's potential and defensibility. While IP is important in traditional sectors, other factors might hold more weight in valuation.

Lastly, there's the matter of litigation frequency. Given its competitive nature, the tech industry sees a high frequency of IP-related litigations. Traditional businesses might not face as many IP-centric disputes.

In summary, while both tech and traditional businesses require robust IP protection, the nature, implications, and urgencies of such protection can differ considerably between the two realms.

Vital IP Elements: What Tech Companies Need to Safeguard

Vital IP Elements: What Tech Companies Need to Safeguard

Several key elements of intellectual property demand stringent protection under the law. Here are some of the most notable.

  • Patents (20-year duration). Patents protect inventions, including software and hardware components. Upon securing a patent, a tech company has the exclusive right to produce, sell, or license its invention, preventing others from replicating or selling it.
    For instance, patented products can't be manufactured or marketed by others without permission. However, interested parties can approach the patent holder for licensing opportunities.
  • Trademarks (10-year duration, renewable). Trademarks encompass distinct names, logos, symbols, phrases, and even unique sounds linked with products or services. For tech companies, a trademark lawyer can help solidify brand identity to ensure that consumers can distinguish between similar products based on quality and reputation.
  • Copyright (life of the author plus 70–95 years). Copyright protects tangible expressions, not ideas themselves. This can include software code, user manuals, marketing materials, and other written or artistic content.
    While automatically granted upon creation, registering copyright bolsters a company's position when pursuing infringements legally or issuing cease-and-desist notices.
  • Trade secrets. A trade secret is a valuable asset that gives tech companies a competitive edge, such as algorithms, unique processes, or specific data compilations. Unlike patents or copyrights, trade secrets aren't registered but are protected as long as they remain confidential and provide economic value.
    For tech companies navigating the complex digital landscape, understanding and strategically leveraging these protections for IP assets and sensitive data is paramount to long-term success and innovation.

Why Software Needs to Be Protected

A computer program is a code that directs a computer to perform specific functions. The human-readable form of this code is called source code, while the machine-readable form is called object code. Source code (but not object code) is protected by common law copyright law and the U.S. Copyright Act.

Software, by contrast, is a computer program plus certain supporting elements, such as:

  • The operating system.
  • The ability to carry out certain specified tasks.
  • Documentation (user manuals, system administrator information, etc.).
  • Codes and data the program uses.
  • Development aids like support programs, compilers, code libraries, toolsets, and APIs.

Every tech company must obtain software intellectual property protection for all of the preceding aspects of its software, not just its source code.

Patent and trade secret laws can protect aspects of your software that copyright law doesn't protect. Additionally, a software license can play a pivotal role in defining the terms of software usage and distribution, adding another layer of protection and clarity for both developers and users.

Three Steps to Protect Your Source Code

Three Steps to Protect Your Source Code

Developers who want to ensure full legal protection for their source code can do so by taking the following measures.

Step 1: Establish Who Owns Your Code

Source code ownership depends on how copyright law applies to the creation of the code. It might seem simple — whoever wrote the code owns it, right? In real-life situations, however, it's rarely that cut and dried.

Two factors in particular often complicate the determination of ownership:

If you agree to create source code as a work for hire, it belongs to the party that hired you. Problems arise when the terms of a work-for-hire agreement are unclear.

A developer might incorporate open-source code under a license. Complying with the license terms can be confusing when you embed open-source code within your proprietary source code.

The assistance of a business lawyer is often essential under these circumstances.

Step 2: Understand the Relevant Legal Structures

Copyright law, patent law, and trade secrets are three legal structures that can protect intellectual property of a digital nature, like software.

Copyright Law

The most basic form of copyright protection begins when you embed unique software code within any tangible medium — even writing your code with a pencil is enough to trigger protection. For full protection, you must register your copyright with the U.S. Copyright Office. The Berne Convention, meanwhile, protects international copyrights.

Patent Law

Unlike copyrights, patent law protects the underlying idea of a system rather than its expression. A patent protects the system that runs a software program, not the code itself. Patent protection endures for at least 20 years in the United States.

Given the complexity of patent law, it will likely be necessary to hire a patent attorney before submitting a patent application to the United States Patent and Trademark Office.

Trade Secret Law

Trade secret law is another option for protecting your IP. The main advantages of trade secrets are that they have no expiration date and protect materials that other IP legal structures don’t.

That said, it's important to note that you can't use a combination of trade secret law and patent law to protect a single item, as once you disclose the trade secret to the USPTO and are granted a patent, it's no longer a secret.

Ultimately, you'll probably need all three of the above-described legal devices to maximize the protection of your IP rights. Determining which legal device you use for which aspect of IP protection is where you'll need the assistance of an IP lawyer.

Step 3: Create Non-Disclosure and Confidentiality Agreements

Step 3: Create Non-Disclosure and Confidentiality Agreements

IP law is public law, while contract law is private. Both will play a major role in your IP protection plan.

Non-disclosure agreements (NDAs) and confidentiality agreements are two weapons you should have in your arsenal. These agreements are beneficial for supplementing trade secret protection.

There's no clear legal difference between an NDA and a confidentiality agreement. Both of these terms describe an agreement that prevents a non-disclosing party from using disclosed information in an unauthorized manner. You can request NDAs with employees, contractors, or joint venture partners.

A typical NDA includes terms formulated to accomplish the following:

  • Define the specific information that's considered confidential (typically source code).
  • Restrict the use of the information for specified purposes.
  • Prohibit disclosure of the disclosed information.
  • Prevent the transfer of disclosed information.
  • Mandate a “return or delete” policy upon the termination of the NDA.
  • Determine the governing law and details of any necessary dispute resolution.

Make it a point to retain an experienced IP lawyer to draft your NDA to avoid unintended consequences.

7 Tips for Your Business IP Security

7 Tips for Your Business IP Security

Along with the aforementioned measures, there are other impactful ways to defend your intellectual property.

1. Document Everything

Keep a secure repository of designs, module architecture, code, email messages, and other relevant documentation. This evidence will make it much easier to win if you end up in court. You can even use it during settlement negotiations.

2. Identify Defensible Assets and Trade Secrets

Examine your IP closely, determining which assets deserve patent filing and which qualify as trade secrets. Notably, while algorithms might be patent-worthy, extensive software code isn't always. Make sure your software stack is both registered and shielded against effortless downloading.

3. Implement Data Loss Prevention Measures

Embrace data loss prevention tools to oversee and restrict data transfers. When set up correctly, these tools can instantly halt any unauthorized data exports, triggering alerts for your teams. It's also wise to grant data access solely for specific roles and evaluate these permissions routinely.

4. Revise Passwords Following Employee Departures

It's imperative that you change passwords for all accounts a departing employee had access to, including non-federated accounts and any secondary communication platforms. Also, ramp up monitoring after their exit to track any suspicious activity.

5. Prioritize Swift, Efficient Execution

While legal measures for IP protection are essential, it's crucial to remember that tech, by nature, is prone to replication. The key is to consistently outpace potential imitators by delivering quicker and superior execution, rendering any stolen code or tech redundant.

6. Optimize Remote Work Management Systems

Optimize Remote Work Management Systems

With the rise in remote work and BYOD policies, companies face the challenge of safeguarding IP across personal devices. Address this by introducing a comprehensive system that includes corporate accounts, role-based access controls, secure cloud ecosystems, and state-of-the-art endpoint data protection solutions.

7. Vet Your Partners Carefully

Conduct thorough background checks on job applicants, developers, and any and all outsourcing companies. IP is a precious resource, and you should always investigate the parties to whom you would grant access to it.

How a Seasoned Commercial Lawyer Can Benefit Your Tech Business

A seasoned commercial lawyer is indispensable in the tech industry, where legality and best practices are an ever-shifting maze. Such professionals can help you not only navigate the complexities of intellectual property protection but also strategize to maximize its effects.

IP lawyers guide tech companies in patenting innovations, trademarking brand assets, copyrighting content, and securing trade secrets.

With ever-evolving tech regulations and fierce competition, having a knowledgeable business lawyer ensures that a company's IP assets are safe and leveraged effectively, fortifying the firm's competitive edge and future growth.

Defend Your Tech Company with Help From Sequoia Legal

The survival of your business is likely to depend, at least in part, on your company’s IP protection efforts. This endeavor is highly complex, often depending on obscure aspects of U.S. and international IP law. It's all too easy to steal from a company that lacks a sophisticated IP protection plan.

You must weigh various factors to construct a comprehensive plan for protecting your company’s IP rights. In this capacity, an IP lawyer is a crucial aid. While the experienced business attorneys at Sequoia Legal aren't patent lawyers, they can assist with filing copyrights and trademarks.

Contact us today by calling (303) 529-6738 or filling out our online contact form to arrange a free consultation.

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Power Your Growth with Confidence: Business Law at Sequoia Legal

Schedule your consultation today and get expert legal guidance for your business in Denver.

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